PRESENTATION TO THE PORTFOLIO COMMITTEE for Arts, Culture, Science & Technology

1. PRESENTATION TO THEPORTFOLIO COMMITTEE for Arts, Culture, Science & Technology DRAFT NFVF STRATEGY

2. HISTORY & STATUS QUO CHANGE IN THE LEGAL AND EXTERNAL ENVIRONMENT NFVF RESPONSE NORMATIVE STRATEGY (CABINET MEMO) STRATEGIC FOCUS AREAS FOR THE COUNCIL AND THE EXECUTIVE STRATEGIC MODEL to balance the past, present and future • Policy • Regulation • Legislation • Government • Operational • Organizational • Old Strategic assumptions • Historical Issues • Key Successes • Learning Curve • Business Plans • Performance assessments • Impact evaluation

3. QUICK VICTORIES • Integrated Marketing Campaign (IMC) to position the sector - Industry Promotion -Communication of Victories (Multimedia) -Celebrate the Stars (Rags to Riches stories) • Buy in for NFVF Strategy • Develop Key Partners Base List • NFVF/Mnet New Directions Agreement • NFVF/MAPPP-SETA MoU • NFVF/SABC MoU R50m of Economic Value Added [EVA]

4. DEFINING STRATEGIC IMPERATIVES Founding Time: 1997 - 1999 Focus: Implementation of the Act Spend: DACST Forming & Establishment Time: 1999 - 2001 Focus: Institutional Development- Spend: R2.675m (25%) NFVF Organic Life Cycle (Stages of Development) Re-Invention Time: Post-2022 Focus: Feasible Revenues: R10 bn Rapid Growth Time: 2002 - 2007 Focus: Sectoral Development Expansion, Market Penetration, New Services & Capital Formation Feasible Revenues: R325m p.a Maturity Time: 2007-2022 Focus: Sectoral Rationalization Feasible Revenues: R3 bn

5. NORMATIVE STRATEGY Normative Strategy: is the morality, legislation and megatrends on which overall strategy is based • Legislative Environment (Cabinet Memo) • Convergence of ICT’s (Information and Communication Technologies) • INDABA 2001 Research and Report • Forging common understanding on industry challenges and possible solutions • A working conference to endorse action plans for the development and promotion of the South African film and television industry

6. STRATEGIC THRUST is about gathering momentum and energy, and launching and projecting ourselves into the future. NFVF needs to make a quantum leap to move from the establishment phase to rapid growth. There is no doubt that leap-frogging forward will bring with it new demands and stresses.

7. Know What • Economics • Culture • NFVF Pertinent Laws • Business Planning • Strategic Planning • Know How • Skill • Intellect (wetware) • Technology software/hardware • Social Facilitation • Functional Competencies • Business Plan • Strategic Plan NFVF Personnel • Social Networks • Professional Affiliation • Government Relations • Industry Relations • Organized Communities • Global Networks • Ethos • Ethics • Morals • Code of Conduct • Beliefs COMPETENCY PROFILING Multi-disciplinary competency is an absolute requirement in order to make the quantum leap to rapid growth

8. MISSION ISSUES Definition of “FILM” • In SA, there is no formal definition of ‘film.’ • This creates a difficulty in defining the agency (reason for existence) and the mission of NFVF. Implicit in the following definitions are some form of open-ended orientations. • The agency and the mission of NFVF can only be substantiated when such a definition is formulated and legislated. • National Context Definition: • There is a prerogative to define film in a national (South African) context. • It needs to be clearer whether definition is classified in terms of ‘moving image’ or technology. • It must also be aligned to international definitions and must be useful in facilitating co-production agreements.

9. MISSION ISSUES Definition of “FILM” continued Legislated Definition (CANADA-SA Co-production Agreement): an “audio-visual co-production” is a project, irrespective of length, including animation and documentary productions, produced either on film, videotape, or videodisc, or in any other format hitherto unknown, for exploitation in theatres, on television, videocassette, videodisc or by any other form of distribution. Australia-Germany Co-production Agreement (Technology independent):‘film’ means an aggregate of images, or of images and sounds, embodied in any material. UK Film Council:‘film’ encompasses all moving image media whether originated on film, video or multimedia formats.

10. STAKEHOLDERS Agency is prescribed by the aspirations of the stakeholders that are served by the Foundation. Stakeholders can be both an asset and a liability to any organisation. The art of leadership is to balance the stakeholder-imposed constraints to any organisation. Therefore NFVF needs to demonstrate leadership by having a strong sense and understanding of diverse stakeholders and their needs. It is imperative that the annual report covers the extent to which diverse stakeholder needs have been met and show the costs incurred in that regard. This will be clear in the proceeding paragraphs where the financial statement model designed in line with the PFMA are discussed. Stakeholder matrix

11. CONSUMER MARKET ANALYSIS Sectoral Service Delivery Measurement Consumer Markets form a major base of any sector. It is the consumers who vote with their money for products and services. It is therefore necessary that the film sector addresses itself to film consumerism in a highly rational manner to cover all sectors of society, in South Africa and abroad. Credible instruments of market segmentations need to be used to ensure that no consumer community is excluded from film as it has been the case in the past. LSM’s

12. GOVERNMENT MARKET ANALYSIS Tax Regime • Tax structure that has worked well in SA to generate FDI & LDI • How transferable is it to the film industry • What is unique to the film industry that needs to be exclusive • Rationale: NFVF must establish clear value chain and multiplier effect breakdown • NFVF commission a study on the benefit structure • Stop using tax as revenue stream by filmmaker, but use it as a capital investment • SA, DACST, DTI, STATS-SA must strive to an international benchmark • Funding Ratio: between Government, Investment companies, and other financial sources • NFVF is intent in pulling industry out of embarrassing profile based on exploitation of the past. • DOC should have a film as part of multimedia desk

13. GOVERNMENT MARKET ANALYSIS Sphere of Provincial Government • Culture is a concurrent competency per spheres of government-National, Provincial, and Local • Discussion of government’s role in industry normally centers around prerogatives of national government and forgetting provincial, to a greater degree forgetting the local government • NFVF will work with provincial government to formulate budgets and monitor expenditure • NFVF & DACST will engage ministry of Local government to explore fiscus opportunities such as Local economic Initiatives (LEI’s) to stimulate municipal film economy.

14. GOVERNMENT MARKET ANALYSIS Consumption by Government • In order for the film sector to feature well in the macro economic equation which is expressed in the formula: • GDP = Private Consumption + Government Consumption + Net Investment • Consumption by Government must be well profiled. Every government department has got communication campaigns where film has not been utilised effectively as a medium of communication by government • This is a paradox for a country such as South Africa which experiences an image crisis. • The NFVF proceeds to rapid growth, consumption by government will be a focus area to generate revenues. • In the life cycle, the figure of R325mil is made plausible by this consideration

15. Wheat Farmer (10%) • Co-operatives (5%) • Milling Companies (40%) • Bakeries (30%) • Retailers (15%) • Consumers R3.50 CAPITAL FORMATION STRATEGY • It has been maintained throughout this strategy that additional sources of capital need to be identified. Options to be explored include the following: • TV License Fees-film generates content for the broadcasting industry. The analysis of the value chain at factors of production through which the film sector contributes to the economics of the broadcasting industry needs to be done. It is clear that all previous discussions and documents on the value chain analysis of the industry have focused on forward and lateral integration. Discussions on backward integration, that is at factors of production of content have been minimum. This issue needs to be addressed. A concrete example is the value chain in the production of bread (the figures presented below are illustrative):

16. CAPITAL FORMATION STRATEGY continued • The total economic value created through broadcasting can only be fully realised through a vastly improved collection system for TV license fees. SARS has demonstrated the benefits to society of an improved tax collection system. To conclude on this matter we believe that careful analysis of value created will indicate that there are some elements which are attributable to film. • Cinema - In order to generate development capital, another method could be a levy on cinema ticket sales. We must investigate the elasticity of demand on tickets. The exhibitors could be the collecting agents. • Ad Valorem Tax - The structure of ad Valorem tax needs to be analysed and the portion attributable to film needs to be identified. • Lottery Fund – Lottery Fund presents a readily available source of capital. • To conclude, these sources of capital all need to be explored in conjunction with all other sources of capital discussed in this document. These include development funding which can be obtained through: • (i)European Union • (ii) European Bank for Development • (iii) European Program for Reconstruction and Development • These funds need to be accessed through cooperation with other government departments. The NFVF can also employ the services of international funding agencies. • It is clear from this strategy how rapid growth can be capitalised. The sourced capital will be employed to fund the Film and Video Initiative and the Film Development Fund. NFVF will explore other avenues for investing capital created (other than parliamentary allocation) for return.

17. GOVERNANCE STRUCTURE MINISTRIES: Council (9-14) DACST Chairperson DTI Executive Committee (< 6) Advisory Panels Chair: Member of Council + Experts (< 5) DOC Council Committees Finance Portfolio Committee Executive Management Provincial Government OPERATIONAL STRATEGY The operational strategy including governance of NFVF, presents the key structures, functions, and processes that drive the normative strategy, fuelled by the strategic thrust. These structures, functions, and processes are explicit and implicit in policy and legislation.

18. OPERATIONAL STRATEGY The structure of the executive management is in line with Section 3 of the NFVF Act, Amendments, PFMA. EXECUTIVE MANAGEMENT Chief Executive Officer National Film Commission Government Relations & Policy (b);(d);(e) Economic Desk (a);(b);(c) Business Development (a);(b);(d);& (NFVF Amendment) Human Capital Development (d);(d);(e) Corporate Services (Legal Admin & Personnel) Industry Relations (a);(d) Marketing Office (a);(c);(d) Finance & Funding (PFMA) PROGRAMMES & PROJECTS MANAGEMENT

19. 1. Film & Video Initiatives 2. Audience Development 3. Training & Development 4. Research & Development 5. Consolidate International MoU’s 6. Establish Provincial Film Commissions 7. Establish National Film Commission 8. Establish a National Film School 9. Produce 6 Feature Films per year 10. Establishment of a legal entity (Amendment 27) TACTICAL STRATEGY Tactical strategy consists of programmes which will be executed. These programmes are spelt out in the DACST Strategy Document Programmes to realise priorities

20. Key objective • INCOME • State Contribution • Fundraising and Marketing • Investment Income • Sales of Services • TOTAL • EXPENDITURE • Training and Bursaries • Research and Development • Production • Distribution and Marketing • Operational Expenditure • TOTAL • SURPLUS/DEFICIT R 18 186 000 2 500 000 100 000 100 000 20 886 000 2 307 000 3 075 000 5 382 000 4 613 000 4 953 000 20 330 000 556 000 BUDGET 2002/2003

21. In Conclusion We look forward to a Strong Future THE END